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"We believe in challenging the status quo and investing our resources to help drive positive change and contribute to better outcomes for hard-working Americans."

SAN FRANCISCO--(BUSINESS WIRE)--Schwab Retirement Plan Services, Inc., a national 401(k) service
provider to approximately 1.3 million workers saving through company
retirement plans, has become the first major firm to launch a
full-service 401(k) program based on low-cost exchange-traded funds.

“We believe workers can and should get more value from their 401(k)s,”
said Steve Anderson, head of Schwab Retirement Plan Services, Inc. “In
2012, we successfully launched Schwab Index Advantage®, designed to help
workers better prepare for retirement using low-cost index mutual funds
and personalized advice. We are now launching an additional version of
Schwab Index Advantage with the goal of further driving down investment
costs by using low-cost exchange-traded funds.”

Anderson estimates a 401(k) plan using index exchange-traded funds can
reduce investment expenses by more than 90 percent compared to a typical
401(k) plan that primarily uses actively managed mutual funds, and by
more than 30 percent compared to a 401(k) plan that uses index mutual
funds.1

Several employers have already expressed strong interest in becoming
first adopters of the exchange-traded fund version of Schwab Index
Advantage. Given the typical 6-12 month sales and implementation cycle
in the 401(k) industry, the firm anticipates clients will be offering
this new version of Schwab Index Advantage to their employees later this
year.

Key Benefits

Exchange-traded funds offer a number of benefits to investors that will
now be available through Schwab Index Advantage, including low
investment costs, a broad range of asset classes, transparency and
timeliness of trades.

“Using a patent-pending process, Schwab Index Advantage is the first
401(k) program that fully integrates exchange-traded funds as core
investments within the plan, including commission-free intraday
investing along with the ability to process partial share interests,”
Anderson said. Many solutions on the market today unitize shares, batch
trades, trade only once a day at a single price, or require individuals
to open a self-directed brokerage account to access exchange-traded
funds. “We believe a truly effective offering requires the ability to
invest in and receive allocations of both full and partial shares of
exchange-traded funds when the market is open, and that’s what we’ve
built. Other 401(k) offerings that we’ve seen take a less comprehensive
approach to including exchange-traded funds and also tend to serve
smaller plans,” he added.

For a growing number of individuals and institutional investors,
exchange-traded funds are being embraced as a mainstay of a diversified
portfolio. Assets in exchange-traded funds have grown from $66 billion
in 2000 to more than $1.6 trillion at the end of 2013 according to the
Investment Company Institute. “The extraordinary growth of
exchange-traded fund assets is undeniable and reflects their ability to
meet investor needs. The notion by some industry commentators that these
benefits should not be available to 401(k) participants reminds me of
the proponents of gas lighting who, 100 years ago, argued that
electricity was dangerous and unnecessary,” observed Anderson.

“Despite the obvious benefits of exchange-traded funds, mutual fund
companies that dominate the 401(k) industry have largely ignored them –
simply because these companies lack either the capabilities or the will
to effectively accommodate exchange-traded funds in the retirement plans
they offer. Others in the industry suggest that offering exchange-traded
funds to 401(k) participants will lead to over-active trading, an
argument not supported by the facts.2 We heard the same false
argument 25 years ago when the industry began updating participant
401(k) balances on a daily basis, instead of quarterly,” Anderson noted.
“We believe in challenging the status quo and investing our resources to
help drive positive change and contribute to better outcomes for
hard-working Americans.”

As with the index mutual fund version of Schwab Index Advantage, the
exchange-traded fund version builds in a low-cost personalized savings
and investment strategy through independent third-party advisory
services provided by either GuidedChoice Asset Management, Inc., or
Morningstar Associates, LLC.3 Workers in the managed account
advisory service receive ongoing investment management based on a
variety of factors including their age, income, account balance and
savings rate in their 401(k) plan. Workers who prefer to manage their
account themselves can do so using either the exchange-traded funds
provided under the plan, or by opening a self-directed brokerage account
if their employer offers this feature in the plan.

“Helping workers who don’t have the time, interest or expertise to
effectively manage their own 401(k) investments is a crucial part of
Schwab Index Advantage,” said Anderson. “We’ve built this so
participants can take advantage of the managed service regardless of the
size of their account balance or their level of investment
sophistication.”

A recent Schwab Retirement Plans Services, Inc., survey found that 61
percent of respondents said they want investment advice for their 401(k)
assets and were nearly twice as confident making investment decisions
when helped by a financial professional.4 Most importantly,
Schwab Retirement Plans Services, Inc., data shows that workers who have
chosen to use independent, professional 401(k) advice in the past have
tended to save more, were better diversified and stuck to their
long-term plan, even in the most volatile market environments.5

Focused on Better Outcomes

The index mutual fund version of Schwab Index Advantage was launched in
2012 and includes an automatic enrollment feature for the managed
account advisory service. Today, 85 percent of workers in the index
mutual fund version remain enrolled in this managed service. Prior to
the transition to Schwab Index Advantage, only about four percent of
these same workers elected to receive advice.

“We can deliver this personalized, professionally managed service for
$45 or less per $10,000 invested. That means, with fund investment costs
and professional management fees combined, workers will pay on average
less than $60 per $10,000 invested with Schwab Index Advantage. They
would pay $95 to $140 per $10,000 invested to have similar professional
management in a typical 401(k) plan that primarily uses actively managed
mutual funds. In fact, our approach delivers personalized advice at a
total cost lower than many plans without any advice included.6
It is a compelling value that can have a real, long-term impact on
retirement savings,” Anderson said.

Employers interested in learning more about Schwab Index Advantage
should visit rethinkyour401k.com
or call Schwab at 877-223-7036.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of challenging
the status quo in our industry, innovating in ways that benefit
investors and the advisors and employers who serve them, and championing
our clients’ goals with passion and integrity.

1 Based on Schwab Retirement Plan Services, Inc., research
using (1) 2010 data from 195 defined contribution plans serviced by
Schwab Retirement Plan Services, Inc., and Schwab Retirement Plan
Services Company, and (2) 2010 data from a comparison set of plans
serviced by other providers. In this comparison set, the weighted
average operating expense ratio (OER) for midsize plans ($20
million–$100 million) using primarily actively managed funds was $55 to
$95 per $10,000 invested, and for large plans ($100 million–$350
million) the OER was $50 to $75 per $10,000 invested. Index mutual fund
estimate is based on an average weighted OER of $15 per $10,000 invested
in plans that have implemented the index mutual fund version of Schwab
Index Advantage and the estimated average weighted OER of $10 per
$10,000 invested for the exchange-traded fund version of Schwab Index
Advantage.

2 Data on users of the self-directed brokerage account
available through Schwab Retirement Plan Services, Inc. Schwab Personal
Choice Retirement Account® (PCRA), shows that participants tend to buy
and hold investments in both Schwab Index Advantage and other 401(k)
plans with a PCRA brokerage window. Today, users of a PCRA in their
401(k) have access to exchange-traded funds as well as stocks, bonds and
other investments. PCRA users average one exchange-traded fund trade per
month.

3 Schwab Index Advantage provides a combination of index
funds with low operating expenses, built in independent professional
advice available through Schwab Retirement Planner®, and Schwab Bank
Savings, an interest-bearing, FDIC insured savings feature through
Charles Schwab Bank. Schwab Retirement Planner® provides participants
with a fee-based retirement savings and investment strategy, a major
component of which is a discretionary investment management service
furnished by independent registered investment advisors GuidedChoice
Asset Management, Inc. ("GuidedChoice®"), or Morningstar Associates,
LLC, a wholly owned subsidiary of Morningstar, Inc. GuidedChoice and
Morningstar Associates are not affiliated with or an agent of Schwab
Retirement Plan Services, Inc. ("SRPS"), or its affiliates. Schwab Index
Advantage, including the Schwab Bank Savings and Schwab Retirement
Planner features, is only available in select retirement plans serviced
by Schwab Retirement Plan Services, Inc.

4 2013 401(k) Participant Survey conducted by Koski Research
for Schwab Retirement Plan Services, Inc. The survey is based on 1004
interviews and has a three percent margin of error at the 95% confidence
level. Survey respondents worked for companies with at least 25
employees, were current contributors to their 401(k) plans and were
25-75 years old. Survey respondents were not asked to indicate whether
they had accounts with Charles Schwab. All data is self-reported by
study participants and is not verified or validated. Respondents
participated in the study between June 5 and June 11, 2013.

5 Charles Schwab in conjunction with Koski Research, The New
Rules of Engagement for 401(k) Plans, 2010. Retirement plan investment
advice is formulated and provided by GuidedChoice Asset Management, Inc.
(GuidedChoice®), which is not affiliated with or an agent of Charles
Schwab & Co., Inc. (CS&Co.), Schwab Retirement Plan Services, Inc.
(SRPS), or any of its affiliates.

6 Based on Schwab Retirement Plan Services, Inc., research
using (1) 2010 data from 195 defined contribution plans serviced by
Schwab Retirement Plan Services, Inc., and Schwab Retirement Plan
Services Company, and (2) 2010 data from a comparison set of plans
serviced by other providers. In this comparison set, the weighted
average operating expense ratio (OER) for midsize plans ($20
million–$100 million) using primarily actively managed funds was $55 to
$95 per $10,000 invested, and for large plans ($100 million–$350
million) the OER was $50 to $75 per $10,000 invested. The $95.00 to
$140.00 per $10,000 invested figure is the sum of the $50 to $95 average
operating expense ratio paid in a typical 401(k) plan plus $45.00 per
$10,000 invested for a managed service fee such as the one provided in
Schwab Index Advantage.

The United States Commodity Funds® is a registered trademark. All rights
reserved.

Vanguard is not affiliated with and does not sponsor, endorse, or
promote the products of Schwab Retirement Plan Services, Inc.